Facts of the Case

The appellants, namely Ambience Hotels & Resorts Pvt. Ltd. and Ambience Developers & Infrastructure Pvt. Ltd., filed appeals before the Delhi High Court against the impugned order passed in tax proceedings. During the pendency of these appeals, the assessees approached the Income Tax Appellate Tribunal under Section 254(2) of the Income Tax Act, 1961 seeking rectification of certain grounds in the original order.

The fact of initiation of rectification proceedings before the Tribunal was brought to the notice of the High Court during the hearing of the appeals.

Issues Involved

  1. Whether an appeal before the High Court is maintainable when rectification proceedings under Section 254(2) are pending before the ITAT.
  2. Whether the assessee can re-approach the High Court after disposal of rectification proceedings if grievances continue.

Petitioner’s Arguments

  • The appellants had substantive grievances against the impugned ITAT order.
  • Simultaneously, they sought rectification before the ITAT on identified mistakes under Section 254(2).
  • The appellants intended to preserve their rights regarding the correctness of the impugned order.

Respondent’s Arguments

  • The Revenue relied upon the legal position regarding maintainability of appeals during pendency of rectification proceedings.
  • It was contended that until rectification proceedings are concluded, the appellate challenge may not be maintainable.

Court Findings / Order

The Delhi High Court observed that since the assessees had already approached the ITAT under Section 254(2) for rectification, the present appeals were not maintainable at that stage.

The Court held that if the appellants remain aggrieved after the ITAT passes an order in rectification proceedings, and the grievances raised in the present appeals still survive, it would be open to them to approach the High Court through appropriate legal proceedings.

Accordingly, the appeals were disposed of while reserving all rights and contentions regarding the correctness of the impugned order.

Important Clarification

The judgment clarifies that where rectification proceedings are pending before the ITAT under Section 254(2), appellate proceedings before the High Court may become premature. The litigant must first exhaust the rectification remedy, and only thereafter pursue appellate remedies if grievances remain.

This ruling reinforces procedural discipline and judicial efficiency in tax litigation.

Sections Involved

  • Section 254(2), Income Tax Act, 1961 – Rectification of mistake by Income Tax Appellate Tribunal (ITAT)

 Link to download the order -

https://delhihighcourt.nic.in/app/case_number_pdf/2017:DHC:8735-DB/SRB18122017ITA8762017_143502.pdf

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